Insurer ambiguity and market failure

A series of studies investigate the decision processes of actuaries, underwriters, and reinsurers in setting premiums for ambiguous and uncertain risks. Survey data on prices reveal that all three types of these insurance decision makers are risk averse and ambiguity averse. In addition, groups appear to be influenced in their premium-setting decisions by specific reference points such as expected loss and the concern with insolvency. This behavior is consistent with a growing analytical and empirical literature in economics and decision processes that investigates the role that uncertainty plays on managerial choices. Improved risk-assessment procedures and government involvement in providing protection against catastrophic losses may induce insurers to reduce premiums and broaden available coverage.This article is part of a larger effort supported by the National Science Foundation on The Role of Insurance, Compensation, Regulation, and Protective Behavior in Decision Making about Risk and Misfortune. We greatly appreciate the many helpful comments and suggestions by our colleagues on the project: Jon Baron, Colin Camerer, Neil Doherty, Jack Hershey, Eric Johnson, and Paul Kleindorfer. Support from NSF Grant #SES8809299 is gratefully acknowledged.     

Two-person sequential bargaining behavior with exogenous breakdown

We examine bargaining behavior in a noncooperative game in which players alternate in making and responding to proposals over the division of a given surplus. Although the number of bargaining periods is unlimited and time is not discounted, the bargaining is subject to exogenous breakdown at each period with a fixed probability which is common knowledge. We manipulate three probabilities of break-down in a between-subjects design that allows comparison with previous studies of two-person bargaining with time discounting. Assuming that subjects maximize expected utility, and this utility is measured by monetary payoffs, our results reject both the subgame perfect equilibrium and equal split solutions. Data analyses reveal that a substantial percentage of subjects behave adaptively in that they systematically search for the highest acceptable demands.     

The value circle. A profile of J. Richard Gaintner, MD.

This article describes how the arrival of CEO J. Richard Gaintner, MD, at Shands HealthCare signaled a time for refocusing the organization's direction and helping physicians to cope with the changes buffeting the industry. He saw angst and disenfranchisement, sentiments that characterized not only Shands and the University of Florida Health Science Center, but also the entire establishment of American scientific medicine. Gaintner believes--and continually preaches--that practicing medicine in a cost-effective manner will improve, not harm, the quality of care. His willingness to face reality objectively is perhaps his greatest asset in helping physicians deal with managed care. He conveys heartfelt empathy with the day-to-day conflicts they face. But he does not allow himself the temporary luxury of cynicism, and he refuses to accept negativity and pessimism in others. Rather, he asks that physicians and managers understand the system and develop the capacity to work within it and take responsibility for improving it. Beyond exhorting physicians to be accountable for the success of the enterprise, Gaintner creates mechanisms for meaningful physician participation in enterprise management.     

Estimable functions in the nonlinear model

When the method of least squares is used to estimate the parameters in a general model and the generated system of normal equations is linearly dependent, the estimate of the vector of parameters which satisfies the criterion is not unique. However, there exist certain functions of the estimated vector of parameters which are invariant to the least squares solution obtained from the normal equations. We define those invariant functions to be estimable, and present a technique to determine the functions of the parameters which are estimable for the general model. The method results in solving either a linear first order partial differential equation or a system of linear first order partial differential equations corresponding, respectively, to a single or multiple dependency between columns of the Jacobian matrix of the mean of the model. The usual results concerning estimability for linear models are a special case of the general results developed.     

The Function of Avoidance in Improving the Understanding of Disaster Recovery

Functional avoidance as an intermittent coping mechanism is a necessary component in disaster recovery. By temporarily avoiding losses after disaster, survivors can secure basic needs and begin rebuilding. It is not until recovery projects are completed that mental health outcomes become apparent. Many individuals begin a healthy grieving process; however, for others, where avoidance extends past the completion of normalizing tasks it becomes pathological. This study presents the concept of functional avoidance and investigates the point at which it becomes dysfunctional using case examples and data from a mental health clinic. Findings suggest increased emotional distress, depression, and posttraumatic stress disorder over 3 years after Hurricane Katrina.     

Development and Consideration of Global Policies for Managing the Future Risks of Poliovirus Outbreaks: Insights and Lessons Learned Through Modeling

The success of the Global Polio Eradication Initiative promises to bring large benefits, including sustained improvements in quality of life (i.e., cases of paralytic disease and deaths avoided) and costs saved from cessation of vaccination. Obtaining and maintaining these benefits requires that policymakers manage the transition from the current massive use of oral poliovirus vaccine (OPV) to a world without OPV and free of the risks of potential future reintroductions of live polioviruses. This article describes the analytical journey that began in 2001 with a retrospective case study on polio risk management and led to development of dynamic integrated risk, economic, and decision analysis tools to inform global policies for managing the risks of polio. This analytical journey has provided several key insights and lessons learned that will be useful to future analysts involved in similar complex decision-making processes.     

The Role of the Communal Voice in Constructing Meaning at the Funeral of an Infant Child in a Quaker Community in Costa Rica

This article attempts to capture the ongoing process of the construction of a “communal voice” out of the idiosyncratic “individual voices” of diverse people in a remote Quaker Community in the rainforest mountains of Costa Rica. The communal story is investigated through the rituals surrounding the death of an infant child. The constant dialogue is examined as the Cliffedgians struggle with issues of community/individualism, tolerance/conviction, and simplicity/benefit. Attention is also given to the communal construction of taboo areas of discourse.     

The Development of Vocational Realism in Black American College Students

A total of 172 Black students completed a survey of biographical, educational, and vocational information about themselves and their immediate relatives. The results indicated that educational realism tended to increase across the college years. There was no difference in satisfaction with school or intent to leave school as a function of educational realism or salary realism. Vocationally realistic male and female students did not differ in age.     

“FOI POR ACASO”*:

Everyone knows that most of the things that happen to them happen “by accident,” and this is particularly true of the things that are most important to us, like our choice of a career or a mate. Yet social science theory looks for determinate causal relationships, which do not give an adequate account of this thing that “everyone knows.” If we take the idea of “it happened by chance” seriously, we need a quite different kind of research and theory than we are accustomed to.